Bond holders want something of value in case the bonds sour?quincunx wrote: ↑Aug 18, 2020Anyone know why that is? So they don't sell the land to pay the debt?
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The type of bonds the city issued prohibit development that is not directly related to the operations of the airport. (Until the bonds are paid off.) This is why Lambert can rebuild fuel tanks/fuel supply system as it directly relates to operations but cannot build a freight forwarding warehouse, hotel or JIT manufacturing facility. As long as there’s debt, those fallow acres are useless. The specific type of bond was outlined in some article (I think from STL public radio) before Lyda pulled the plug. IIRC from the article, the city chose that option as it was easier to issue due to the large amount they were seeking but had it more restrictions. Someone might have more knowledge and specifics (GC?)
I am under the impression they are going to retire debt in the next year or two that opens up a fair amount of the land to development options.
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^^They used FAA programs and eminent domain to buy out whole neighborhoods for noise abatement. My understanding is that the Feds required the bonds to be issued with certain strings attached so that they didn't turn around and sell people's houses at a profit. Sounded like basic anti-corruption/anti-kickback stuff. And I assume that's why private operators are salivating at it: that land is actually valuable. And soon the airport will have paid the relevant bonds off and they'll be able to lease out the land as they please. There's a clock. And it's not even just the Grow MO payment deadline. Once the airport can lease that land out themselves there will be a lot less incentive to lease out the entire airport as a job-lot. If someone private is managing the airport odds are good they'd be able to control the subleases and steer them to whomsoever they wished. Which is why the whole thing smells fishy to me.
It's worth noting that the article in the Atlantic was a letter written by a writer for hire, not an editorial from their staff. He's written on some fairly conservative subjects before and on what amounts to his own CV he proudly declares the editor at a previous employer, D Magazine, will pay him a hundred dollar bonus if DFW gets leased out. There's no mention of a bonus here, but it wouldn't surprise me. I'm sure the Sinquefields are aware of the article he wrote for D and the letter to the Atlantic hammers on Lambert an awful lot. It more or less quotes all the talking points from the Reed/NAACP campaign and spends as many words talking about Lambert as DFW, an airport he investigated closely himself in what was his home market at that time. So you have to ask yourself, why is he writing this just now? My best guess is that someone wanted the privatization facts in a national magazine with a more Democratic leaning readership and hoped no one would check the byline, and paid him to write the thing, since it's an area he cares about anyway.
The bottom line is it's fairly well written article. He's a talented guy, and it's likely an honest opinion. (Though I very much suspect someone did pay him and we've no clear indication who. He didn't chuck that out there on a lark. It's too well polished and shows too much effort.) But there's also nothing new in it. The numbers he gives are more or less exactly the numbers we already knew. They're the arguments we've already heard. If you're pro-private it's another ticked box. If you're anti it's unlikely to convince you.
For my part, I'd sure like to know who paid for it. Maybe the Atlantic hired him, but somehow I doubt it. He'd have mentioned that if it were true. I feel certain it's a freelance submission, though I wouldn't be at all surprised that strings were pulled to get it published. None of which means it's wrong. But . . . who paid him?
It's worth noting that the article in the Atlantic was a letter written by a writer for hire, not an editorial from their staff. He's written on some fairly conservative subjects before and on what amounts to his own CV he proudly declares the editor at a previous employer, D Magazine, will pay him a hundred dollar bonus if DFW gets leased out. There's no mention of a bonus here, but it wouldn't surprise me. I'm sure the Sinquefields are aware of the article he wrote for D and the letter to the Atlantic hammers on Lambert an awful lot. It more or less quotes all the talking points from the Reed/NAACP campaign and spends as many words talking about Lambert as DFW, an airport he investigated closely himself in what was his home market at that time. So you have to ask yourself, why is he writing this just now? My best guess is that someone wanted the privatization facts in a national magazine with a more Democratic leaning readership and hoped no one would check the byline, and paid him to write the thing, since it's an area he cares about anyway.
The bottom line is it's fairly well written article. He's a talented guy, and it's likely an honest opinion. (Though I very much suspect someone did pay him and we've no clear indication who. He didn't chuck that out there on a lark. It's too well polished and shows too much effort.) But there's also nothing new in it. The numbers he gives are more or less exactly the numbers we already knew. They're the arguments we've already heard. If you're pro-private it's another ticked box. If you're anti it's unlikely to convince you.
For my part, I'd sure like to know who paid for it. Maybe the Atlantic hired him, but somehow I doubt it. He'd have mentioned that if it were true. I feel certain it's a freelance submission, though I wouldn't be at all surprised that strings were pulled to get it published. None of which means it's wrong. But . . . who paid him?
Looks like the NAACP is looking to pull their privatization plan from the November 3rd ballot:
https://www.stltoday.com/news/local/gov ... op-story-1
https://www.stltoday.com/news/local/gov ... op-story-1
Adolphus Pruitt, the city NAACP president and a leader in the St. Louis Rising committee pushing for privatization, did not confirm that Tuesday. However, he acknowledged in a text message that “the timing of our proposition could prove problematic.” He cited increases in coronavirus cases in many areas of the country and mounting financial losses in the airline industry.
“We will release a statement soon,” he said.
Continued pandemic-related economic problems for airlines could conceivably limit the amount of money that bidders seeking to lease Lambert might offer the city.
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Privatization Improves Airports
Laurent Belsie summarizes a new NBER paper, All Clear for Takeoff: Evidence from Airports on the Effects of Infrastructure Privatization:
Laurent Belsie summarizes a new NBER paper, All Clear for Takeoff: Evidence from Airports on the Effects of Infrastructure Privatization:
https://www.nber.org/papers/w30544When private equity funds buy airports from governments, the number of airlines and routes served increases, operating income rises, and the customer experience improves.
…As of 2020, nearly 20 percent of the world’s airports had been privatized. Private equity (PE), usually through dedicated infrastructure funds, is playing an increasing role in privatization, purchasing 102 airports out of a total of 437 that have ever been privatized.
…A key metric of airport efficiency is passengers per flight. The more customers an airport can serve with existing runways and gates, the more services it can deliver and the more earnings it can generate. When PE funds buy government-owned airports, the number of passengers per flight rises an average 20 percent. There’s no such increase when non-PE private firms acquire an airport. Overall passenger traffic rises under both types of private ownership, but the rise at PE-owned airports, 84 percent, is four times greater than that at non-PE-owned private airports. Freight volumes and the number of flights, other measures of efficiency, show a similar pattern. Evidence from satellite image data indicates that PE owners increase terminal size and the number of gates. This capacity expansion helps enable the volume increases and points to the airport having been financially constrained under previous ownership.
…PE firms tend to attract new low-cost carriers to their airports, which in turn may lead to greater competition and offer consumers better service and lower prices. With regard to routes, PE acquirers increase the number of new routes, especially international routes, more than other buyers. International passengers are often the most profitable airport users, especially in developing countries.
A PE acquisition is also associated with a decline in flight cancellations and an increase in the likelihood of receiving a quality award. When an airport shifts from non-PE private to PE ownership, its odds of winning an award rise by 6 percentage points. The average chance of winning such an award is just 2 percent.
The fees that airports charge to airlines rise after airport privatizations. When the buyer is a PE firm, there is also a push to deregulate government limits on those fees. For example, after three Australian airports were privatized in the mid-1990s, the price caps governing airport revenues were replaced with a system of price monitoring that allows the government to step in if fees or revenues become excessive.
The net effect of a PE acquisition is a rough doubling of an airport’s operating income, due mostly to higher revenues from airlines and retailers in the terminal rather than cost-cutting. The driving forces behind these improvements appear to be new management strategies, which likely includes greater compensation for managers, alongside investments in new capacity as well as better passenger services and technology.
Airports perform better when owned by private equity funds, study finds
https://phys.org/news/2023-03-airports-private-equity-funds.html
https://phys.org/news/2023-03-airports-private-equity-funds.html
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It's weird that privatizing airports would work so well when every other privatization has gone so poorly.
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Generally the privatization that does off the rails is local, and yes airports are local but there is still the FAA layer above that really governs it, like the City has no governing power over the airport that it would give up if it turned it over to a private operator.
I think I posted this video back in the Lambert Privitization days. It can work. I really wish Lambert had pursued Royal Schiphol’s pitch.
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What is the benefit of airport privatization supposed to be? The purpose of privatization has only ever been to let the wealthy skim a portion of revenue from public services, and for the politicians to endear themselves to those capitalists by selling the public out. It's been that way since the birth of privatization in Nazi Germany.
"...in many cases, running the airport the way the public wants it to be run is bad business." No kidding!shadrach wrote: ↑Apr 06, 2023I think I posted this video back in the Lambert Privitization days. It can work. I really wish Lambert had pursued Royal Schiphol’s pitch.
^not sure. That case for Lambert was to have a someone pay off the bonds these used to build the new runways. From what I heard, the type of bond they issued is really restrictive on land use and it’s killing Lambert’s ability to maximize airport growth and attractiveness to freight forwarders.
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I find it hard to believe that the private equity ROI will be lower than the rate on debt (new or old). But I'm sure that ROI is a lot less transparent when they pitch the deal.shadrach wrote: ↑Apr 06, 2023^not sure. That case for Lambert was to have a someone pay off the bonds these used to build the new runways. From what I heard, the type of bond they issued is really restrictive on land use and it’s killing Lambert’s ability to maximize airport growth and attractiveness to freight forwarders.
Oy, you start talking ‘private equity ROI’ and I’m lost so I’m not sure what you intended with that conment.
I’m no expert on this and going by articles, conversations, etc. The airport owns a lot of developable adjacent land. However, the bonds prohibit construction of anything not related to direct airport operations. So fuel facilities, fire department - yes. Freight forwarding warehouses, hotel, parking garage, JIT manufacturing, meat processing plant for the Asian market - no.
So developers would want to pay off those bonds and build i.e. a meat packing plant right an the edge of the tarmac so finished product loaded right on the plane. And a lot of other things just like that.
I’m no expert on this and going by articles, conversations, etc. The airport owns a lot of developable adjacent land. However, the bonds prohibit construction of anything not related to direct airport operations. So fuel facilities, fire department - yes. Freight forwarding warehouses, hotel, parking garage, JIT manufacturing, meat processing plant for the Asian market - no.
So developers would want to pay off those bonds and build i.e. a meat packing plant right an the edge of the tarmac so finished product loaded right on the plane. And a lot of other things just like that.
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Private equity ROI is the wastage that we lose by privatizing the airport (or any other public property/service).shadrach wrote: ↑Apr 06, 2023Oy, you start talking ‘private equity ROI’ and I’m lost so I’m not sure what you intended with that conment.
I’m no expert on this and going by articles, conversations, etc. The airport owns a lot of developable adjacent land. However, the bonds prohibit construction of anything not related to direct airport operations. So fuel facilities, fire department - yes. Freight forwarding warehouses, hotel, parking garage, JIT manufacturing, meat processing plant for the Asian market - no.
So developers would want to pay off those bonds and build i.e. a meat packing plant right an the edge of the tarmac so finished product loaded right on the plane. And a lot of other things just like that.
I'm skeptical of the idea that the only way to legally develop the airport is to hand it over to private investors. We can't issue new, less-restrictive bonds to pay off the old ones?
Obviously, they can’t. Or won’t.
Rhonda has done a remarkable job breathing life back into it but I think Bi-State should manage the airport. And they should hire Rhonda.
Rhonda has done a remarkable job breathing life back into it but I think Bi-State should manage the airport. And they should hire Rhonda.
Please, please no bi-state and Lambert! I own a business at the St. Louis Downtown Airport and have been trying to build a hangar there for years, and have the airport improve the grounds. Bi-State owns the airport and hasn't lifted a finger to help me, they have zero interest in the airport, and will not spend a dime to improve it.
I sat in on a meeting with the last developer who made the pitch to take Lambert private about 8 years ago, I left unconvinced.
I sat in on a meeting with the last developer who made the pitch to take Lambert private about 8 years ago, I left unconvinced.
Alrighty then
Huh, that’s too bad. I’m surprised because they’ve done a good job with the Freightway. You’d think the health of SLDA would be a key factor in that.
I recommended Bi-State because their interstate taxing authority is unique and can be useful for a lot of metro area initiatives l.
Huh, that’s too bad. I’m surprised because they’ve done a good job with the Freightway. You’d think the health of SLDA would be a key factor in that.
I recommended Bi-State because their interstate taxing authority is unique and can be useful for a lot of metro area initiatives l.
I think the idea with privatization is they would be a better at running the airport than the city from a financial perspective and be able to do a better job getting more income out of it. They obviously are going to get their share of the money, but they would make enough more that the airport gets more than it does currently as well.
Would that be the actual case? Not sure. But under normal circumstances I would be open to listening. I was strongly against the last iteration because it was shady and not transparent. I’m also not happy that we wasted time on it which basically put the airport in a 2 year stall waiting for it to sort itself out. Because I don’t want another stall I personally don’t want to go back down the privatization road again until the new terminal is complete.
Would that be the actual case? Not sure. But under normal circumstances I would be open to listening. I was strongly against the last iteration because it was shady and not transparent. I’m also not happy that we wasted time on it which basically put the airport in a 2 year stall waiting for it to sort itself out. Because I don’t want another stall I personally don’t want to go back down the privatization road again until the new terminal is complete.
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Sure that's what they say, but it never works out that way. There's a myth that Private Enterprise is more Efficient or Innovative but that's obviously not true. Private business success is built on amorally abusing monopolies and exploiting workers, not some kind of ingenious capitalist wizardry beyond the ken of mortal public servants.jshank83 wrote: ↑Apr 07, 2023I think the idea with privatization is they would be a better at running the airport than the city from a financial perspective and be able to do a better job getting more income out of it. They obviously are going to get their share of the money, but they would make enough more that the airport gets more than it does currently as well.
Would that be the actual case? Not sure. But under normal circumstances I would be open to listening. I was strongly against the last iteration because it was shady and not transparent. I’m also not happy that we wasted time on it which basically put the airport in a 2 year stall waiting for it to sort itself out. Because I don’t want another stall I personally don’t want to go back down the privatization road again until the new terminal is complete.
The NBER paper cited above is instructive. See this from the abstract:
PE owners invest in new physical capacity and appear to negotiate more effectively with airlines, especially in the presence of a state-owned flag carrier. Higher prices and more retail revenue increase net income, with no evidence of cost reductions or layoffs. We find that improvements are concentrated when there is a competing airport nearby, under longer-term leases, and when the local government is less corrupt.
Do any of these conditions apply to Lambert? I'd say no...Definitely no "state-owned flag carrier." Competing airports? Maybe, but limited to specific flight types/markets. Long-term lease? I guess that would be negotiated. Local government is less corrupt...? Maybe, not clear what this means. I could argue that the kind of inefficiencies that rise from corruption are not that different from those that arise from overlapping and competing political jurisdictions.
For the record I also share Mark's ideological critique--privatization of public assets is almost everywhere a bullsh*t ploy for capitalists and their politician toadies to milk the public.
The "acknowledgements" section of the NBER paper is also instructive--the paper basically came out of PE-sponsored symposiums with University business schools (who, I would bet dollars to donuts, have significant Foundation and employee pension investments with PE funds and/or PE individuals, including Alumni). NBER papers are not peer-reviewed. Make of that what you will.
One last point: Buried in Table 2 of the PDF is a set of summary statistics, including local market airline industry concentration. Note that PE-backed airports operate in significantly less-concentrated markets with multiple competing carriers compared to public-owned airports. I would argue that this is the real issue with air travel in the US--too much concentration combined with lax government regulation allows airlines to engage in bad behavior without consequence, e.g., bilking the PPP during COVID (by forcing senior pilots to take early buy-outs instead of laying them off, a ridiculous loophole, thank you Congress), schedule flights they know they can't staff and then refuse to provide refunds except in airline funny money, and delay needed upgrades and system maintenance on ticketing and scheduling systems that further result in canceled flights, etc.
One last point: Buried in Table 2 of the PDF is a set of summary statistics, including local market airline industry concentration. Note that PE-backed airports operate in significantly less-concentrated markets with multiple competing carriers compared to public-owned airports. I would argue that this is the real issue with air travel in the US--too much concentration combined with lax government regulation allows airlines to engage in bad behavior without consequence, e.g., bilking the PPP during COVID (by forcing senior pilots to take early buy-outs instead of laying them off, a ridiculous loophole, thank you Congress), schedule flights they know they can't staff and then refuse to provide refunds except in airline funny money, and delay needed upgrades and system maintenance on ticketing and scheduling systems that further result in canceled flights, etc.